KYC And AML Policy

Introduction

Money laundering is a serious threat to the financial system of countries across the world both developed and underdeveloped and growing economies like India. It is also a potential threat to the integrity and sovereignty of countries. To combat this criminal act of money laundering in an interconnected economy, the Financial Action Task Force on money laundering (FATF) was established at the G-7 summit in Paris. FATF recommendations set out the basic framework for anti-money laundering efforts and were designed with universal application in mind. The Basel Committee on banking supervision issued its statement on the criminal use of the banking system for the purpose of money laundering.

In India, the Central Government vide its notification no GSR 436(E), dated 1.7.2005 enacted Prevention of Money Laundering into apparently legal money either directly or indirectly and curb the threat to banks and financial institutions. Thereafter, the Reserve Bank of India (RBI), Securities and Exchange Board of India (SEBI), and National Housing Bank (NHB) have also issued guidelines (collectively referred to as “guidelines” applicable, to ensure that a proper policy framework is formulated and put in place. The PMLA and the guidelines also cast an obligation on banking companies, financial institutions, and intermediaries now identified as reporting entities, to ensure compliance.

Need for the policy

To comply with NHB guidelines on AML & KYC, and ensure that ALTUM CREDO HOME FINANCE PRIVATE LIMITED (ACHFPL) is not used as a vehicle for money laundering and terrorism financing, ACHFPL has undertaken to frame this policy.

The main objective of this policy

To establish and lay down the general framework for identification and acceptance of customers through documentary and other means and to act as a deterrent against money laundering, and terrorism financing and assist law enforcement agencies in this regard;

 To ensure compliance with the PMLA, amendments, rules thereunder and the guidelines in force from time to time;

 To protect its reputation, values, and ethics;

 To lay down compliance norms for the employees

The risk involved in the event of non-compliance with the Act, Rules, and Guidelines:

ALTUM CREDO is aware that it is exposed to several risks such as Operational, Legal, Compliance, Business & Financial Risks if appropriate anti-money laundering measures and/or proper framework are not established. In terms of the KYC norms and as per Section 12 of The Prevention of Money Laundering (Amendment) Act, 2012 the Company (reporting entity) is inter alia required to comply with the obligations detailed as under:

  1. Maintain a record of all transactions, including information relating to attempted transactions, in such manner so as to enable it to reconstruct individual transactions
    1. Furnish to the Director – Financial Intelligence Unit – India (FIU-IND), within such time as may be prescribed, information relating to such transactions, whether attempted or executed
    2. Verify the identity of all its customers;
    3. Identify the beneficial owner, if any, of such of its customer; and
    4. Maintain a record of documents evidencing identity of its customers and beneficial owners as well as account files and business correspondence relating to customers
  2. Ensure confidentiality of every information maintained, furnished, or verified, save as otherwise provided under any law
  3. Maintain records referred to in clause (1) above for a period of five years from the date of the transaction between a customer and the company.
  4. Maintain records referred to in clause (d) above for a period of five years after the business relationship between a customer has ended or the account has been closed, whichever is later.
NHB directions under KYC and AML policy:

Appointment of designated director

The managing director or whole-time director of ALTUM CREDO duly authorized by the Board to be been appointed as the Designated Director in compliance with Rule 2(ba) of the Maintenance of Records Rules of the PMLA. The final responsibility lies with the Designated Director to ensure overall compliance with the obligations imposed under Chapter 4 of the Act and the Rule/ Regulations thereunder. The designated director will ensure implementation and compliance with the policy framed from time to time.

Appointment of Compliance Officer/Principal Officer

The person directly reporting to the Designated Director is to be appointed as the Principal Officer in compliance with Rule 2(f) of the Maintenance of Records Rules of the PMLA. The Principal
The officer under the supervision and guidance of the Designated Director Compliance officer shall be responsible to ensure overall compliance with the obligations thereunder.

The Designated Director and Principal Officer will, inter-alia be responsible for:

   Implementing the policy by drawing up the procedures

   Coordinating within the organization at different levels for monitoring the compliance of the policy and procedures on KYC and AML.

   Updating / Modifying the policy with changes in laws and regulations with the Boards approval.

   Allocating duties and responsibilities to ensure implementation and compliance with the policy frame.

   Training and dissemination of information concerning guidelines and other rules and regulations on KYC and AML and updating staff/ customers of the changes from time to time

   Reporting status on the compliance of the KYC norms to the Board

 Formation of the senior management committee:

  Committee to be comprised of Senior-level representatives from Credit, Finance, Operations and Audit, collections, and Business. The key objective is to review compliance with the policy and procedures which are being implemented at regular intervals.

 The senior committee reports to Designated Director.

Monitoring of transactions, maintenance, and preservation of records

The company shall monitor and also maintain a record of any transaction on the loan accounts where there has been a receipt or payment in cash exceeding Rs. 10 Lakhs per transaction; and also monitor and maintain records of deposits and loan accounts
where there has been a series of cash transactions from the same customer during the month exceeding 10 Lakhs.

The company shall maintain proper records of transactions as prescribed under Rule 3, of the Prevention of Money-Laundering (Maintenance of the Records) Rules, 2005)

The company shall also maintain the record of all transactions including, the records of:

   all-cash transactions of the value of more than rupees Ten Lakh or its equivalent in foreign currency;

   all series of cash transactions integrally connected to each other which have been individually valued below rupees Ten Lakh or its equivalent in foreign currency where such series of transactions have taken place within a month and the monthly aggregate exceeds an amount of Ten Lakh rupees. ; ACHFPL does not deal in cash for any of its business transactions except in recoveries of difficult borrower accounts. Therefore, ALTUM CREDO does not foresee any situation where any business transaction shall be carried out in cash in excess of Rs. 10 Lakh or more.

   all transactions involving receipts by non-profit organizations of rupees ten lakh or its equivalent in foreign currency;

   all-cash transactions where forged or counterfeit currency notes or bank notes have been used as genuine and where any forgery of a valuable security or a document has taken place facilitating the transaction;

   all suspicious transactions whether or not made in cash.

   all cross-border wire transfers of the value of more than Five Lakh rupees or its equivalent in foreign currency whether either original or destination of the fund is in India.

   All purchase and sale by any person of immovable property valued at Fifty lakh rupees or more that is registered by the ALTUM CREDO

The records referred to above shall contain all necessary information including the following information:

  The nature of the transactions
  The amount of the transaction and the currency in which it was denominated;
  The date on which the transaction was conducted;
  The parties to the transaction.

Internal audit

An independent evaluation of the controls for identifying high-value transactions / suspicious transactions will be carried out on a regular basis by the internal process audit team. Such compliance reports will be placed at the Senior management committee at regular intervals.

Reporting of transactions

A report on the following transactions should be made by the 15th of the succeeding month:

   all-cash transactions of the value of more than rupees Ten Lakh or its equivalent in foreign currency;

   all series of cash transactions integrally connected to each other which have been valued below rupees Ten Lakh or transactions have taken place within a month and the aggregate value of such transactions exceeds rupees ten lakh;

   all transactions involving receipts by non-profit organizations of rupees Ten Lakhs or its equivalent in foreign currency.

   all-cash transactions where forged or counterfeit currency notes or bank notes have been used as genuine and where place facilitating the transactions;

   all cross-border wire transfers of the value of more than Five Lakh rupees or its equivalent in foreign currency whether either the original or destination of the fund is in India.

The Report on the following transactions would be made within 7 working days of reaching the conclusion, that the transaction is of suspicious nature:

   all transactions whether or not made in cash as specified in Rule 3(d) of Rule 3, of the Prevention of Money-Laundering (Maintenance of the Records) Rules, 2005)

 The report on the following transactions would be made by the 15th day of the month succeeding the quarter:

All purchase and sale by any person of immovable property valued at Fifty lakh rupees or more that is registered by the ALTUM CREDO

Principal Officer on behalf of ALTUM CREDO will provide all the necessary help, to the authorities, such as NHB, and Director FIU-IND for any further inquiries and clarifications or for any other purpose for which specific requisitions are made.

Reporting of the transactions to the designated agency shall be done as follows:
The Principal Officer shall report the cash transactions / suspicious transactions / counterfeit transactions to:
Director, FIU-IND,
Financial Intelligence Unit- India,
6th Floor, Hotel Samrat, Chanakyapuri, New Delhi – 110021.

Responsibilities assigned to the personnel
With a view to implementing the KYC policies and procedures effectively and also to fix accountability for lapses and intentional circumvention of the prescribed procedures and guidelines the responsibilities are delegated across the organization

Know Your Customer – (KYC) guidelines and Anti Money Laundering Standards (AML) at ALTUM CREDO

The objective of the KYC and AML policy of ALTUM CREDO is to prevent ALTUM CREDO from being used intentionally, or unintentionally, by criminal elements for laundering activities or terrorism financing. KYC and AML procedures will also enable ALTUM CREDO to know/understand ALTUM CREDO’s customers and their financial dealing better, which in turn will manage the risks prudently.

The process of KYC and prevention of Money Laundering will be implemented through the following procedures:

  1. Customer Identification Procedures;
  2. Customer Acceptance Policy;
  3. Risk classification of customer profile and reporting to appropriate authority
Customer Identification Procedure (CIP)

The PMLA and read with Rule 9 of The Prevention of Money-Laundering (Maintenance of Records) Rules, 2005 inter alia requires HFC to identify its clients, verify their identity and obtain information on the purpose and intended nature of the business relationship. It also provides that HFCs shall identify the beneficial owner and take all reasonable steps to verify his identity

The objective of establishing the identification of the customers is to:

   Verify the status of the customer (the legal status of legal customer/ entity) through proper and relevant documents.

   Verify that any person purporting to act on behalf of the customer, or legal person/entity is so authorized. Verify the identity of such an authorized person.

   Understand the ownership and control structure of the customer and determine who are the natural persons who ultimately have control over management.

The following factors shall take into account whilst framing norms relating to CIP.

   The document(s) for verifying and establishing the identity of the customer or Referral Associates shall be those as prescribed by the FIU-IND/ Regulator(s), from time to time.

   The document(s) accepted for verifying and establishing the identity of the customer shall be the latest.

   All document(s) accepted as part of CIP, must be attested by the customer and countersigned by the concerned officer with his name/ employee number on such documents.

The Customer Identification Procedure shall be carried out by verifying the identity of the customer and the residence proof of the customer. The designated director/ principal officer shall draw up the list of documents to be verified and collected for this purpose at the time of establishing a relationship with custom not in the regular nature of business.

The Customer Identification Procedure is to be carried out at the following stages i.e.

 A. While establishing a relationship

In the case of a customer who intends to avail of a loan, at the time the duly completed application form along with the processing fees is received from the prospective borrower.

B. While carrying out a financial transaction

In the case of a borrower, a financial transaction is said to have been carried out at the time of disbursing the first disbursement.

ACHFPL shall undertake the identification of customers in the following cases:

(a) Commencement of an account-based relationship with the customer.
(b) When there is a doubt about the authenticity or adequacy of the customer identification data it has obtained.
(c) Selling third-party products as agents, selling their own products and any other product for more than rupees fifty thousand.

For the purpose of verifying the identity of customers at the time of commencement of an account-based relationship, ACHFPL, shall at their option, rely on CDD (Customer due diligence) done by a third party, subject to the following conditions:

  Records or the information of the customer due diligence carried out by the third party is obtained within two days from the third party or from the Central KYC  Records Registry.
  Adequate steps are taken by ACHFPL to satisfy themselves that copies of identification data and other relevant documentation relating to the customer due to diligence requirements shall be made available from the third party upon request without delay.
  The third party is regulated, supervised, or monitored for, and has measures in place for, compliance with customer due diligence and record-keeping requirements in line with the requirements and obligations under the Prevention of Money-Laundering Act.
  The third-party shall not be based in a country or jurisdiction assessed as high risk.
  The ultimate responsibility for CDD, including done by a third party and undertake enhanced due to diligence measures, as applicable, shall rest with the ACHFPL.

Customer Acceptance Policy (CAP)

The company to verify the identity of the customer with proper adherence to Customer
Identification procedure before accepting duly completed application form for placement of deposit, issuing a sanction letter to a loan borrower. ACHFPL would accept customers only after verifying their identity with valid documents as prescribed by the FIU-IND / Regulator(s), from time to time.

ACHFPL shall endeavor that no account is opened in anonymous or fictitious / Benami name(s) and shall also endeavor to ensure that no account is opened of a customer who has a criminal record or whose name is in the list of banned entities or list of terrorist individual/ organizations under UNSCR. The Designated Director/ Principal Officer shall issue necessary guidelines to the retail offices in this regard so as to ensure that the relevant documents are taken so as to satisfy that no account is opened in anonymous or fictitious / Benami name(s).

Further, as per the PLMA guidelines, if in case, the customer does not provide full information for Customer Identification and Customer acceptance within 45 days of the opening of the account, then ACHFPL would retain the right to close the account.

ACHFPL to ensure that:

  No account is opened in an anonymous or fictitious/ benami name.
  No account is opened where the ACHFPL is unable to apply appropriate CDD measures, either due to non-cooperation of the customer or non-reliability of the documents/information furnished by the customer
  No transaction or account-based relationship is undertaken without following the CDD procedure (As per annexures)
  The mandatory information to be sought for KYC purposes while opening an account and during the periodic updation, is specified.
  Where PAN is obtained, the same shall be verified from the verification facility of issuing authority
  Optional! additional information is obtained with the explicit consent of the customer after the account is opened.
  CDD Procedure is followed for all the joint account holders while opening a joint account
  If an existing KYC-compliant customer of ACHFPL desires to open another account with the same HFC, there shall be no need for a fresh CDD exercise.
  Circumstances in which, a customer is permitted to act on behalf of another person/entity, are clearly spelled out. A suitable system is put in place to ensure that the identity of the customer does not match with any person or entity, whose name appears in the sanctions lists issued by the UN Security Council circulated by the National Housing Bank and the sanctions lists circulated by the Reserve Bank of India from time to time.

Risk classification of customer profiles

ACHFPL shall carry out a risk assessment to identify, assess and take effective measures to mitigate its money laundering and terrorism financing risks for clients, countries, geographic areas, and products, services, transactions, or delivery channels that are consistent with any national risk assessment conducted by a body or an authority duly notified by the Central Government

The information available from the customers to prove their identity and residence will determine the risk perception. However, for proper risk assessment of business relationships with customers, the customers are broadly classified as Low Risk, Medium Risk, and High
Risk is based on the risk perceived. Low-risk customers shall be those whose identity and source of wealth can be easily identified, while high risk will be those who will have to be subjected to additional due diligence.

Identification of a class of Customers under various risk categories:

   Low Risk:

  • Accounts of the following customers are categorized as Low-Risk Profile Customers: Resident individuals.
  • A salaried employee with a well-defined salary structure.
  • Employees of Government Departments, Government Owned Companies, Regulatory and Statutory Bodies. People belonging to lower economic strata of the society whose accounts show small balances and low turnover.

   Medium Risk:
Accounts of the following customers are categorized as Medium Risk Profile Customers:

  • Private Limited Companies
  • Partnership Firms
  • LLPs
  • Customer’s background,
  • Nature and location of the activity
  • Country of origin,
  • Sources of funds and his client profile, etc.

   High Risk:
Accounts of the following customers are categorized as High-Risk Profile Customers:

  • Non-resident customers,
  • High net worth individuals,
  • Trusts, charities, NGOs, and organizations receiving donations,
  • Companies having close family shareholding or beneficial ownership,
  • Firms with ‘sleeping partners’,
  • Politically exposed persons (PEPs) of foreign origin,
  • Non-face to face customers, and
  • Those with dubious reputations as per public information available, etc.

The Company to define the negative profiles in the credit policy in compliance with the above the company will make suitable amendments accordingly.

Storage & retrieval of documents/ data:

To maintain for at least five years from the date of the transaction between ACHFPL and the customer, all necessary records of the transactions, both domestic and international will permit reconstruction of individual transactions so as to provide, if necessary, evidence for the prosecution of the person involved in criminal activities are delegated across the organization.

Education, training, and information:

ACHFPL to take the various initiatives to educate the customers on KYC norms and need to collect such information as per the KYC norms. To sensitize staff towards the importance of KYC & AML procedures, the company designed its training material for employees. As sustainable awareness across organizations, it’s more effective to impart such training at the time of onboarding of employees and also at regular intervals.

Review of policy

ACHFPL’s Board to review the policy adopted for KYC and AML as and when required and recommend the incorporation of suitable modifications/changes. Modifications in the policies as a result of the change in the NHB guidelines will be incorporated as required under the statute. All such changes /modifications will be
reported to the Board for approval.

Annexures: Customer due diligence procedure (CDD)

1. Procedure in case of individuals

The Company shall apply the following procedure while establishing an account-based relationship with an individual:
(a) Obtain information as mentioned in the policy
(b) Such other documents pertaining to the nature of the business or financial status specified by in the policy.

Individual shall submit

– Aadhaar number where he is desirous of receiving any benefit or subsidy. OR
– The proof of possession of Aadhaar where offline verification can be carried out/cannot be carried out OR
– Any officially valid document containing details of identity and address AND
– PAN or equivalent doc. AND
– Such other documents
(If Aadhaar is provided, shall carry out authentication of Aadhaar)

The information collected from customers for the purpose of opening of account shall be treated as confidential and details thereof shall not be divulged for the purpose of cross-selling, or for any other purpose without the express permission of the customer.

2. CDD measures for sole proprietary firms

For opening an account in the name of a sole proprietary firm, identification information as mentioned of the individual (proprietor) shall be obtained.

In addition to the above, any two of the following documents as a proof of business/activity in the name of the proprietary firm shall also be obtained:

(a) Registration certificate.
(b) Certificate/license issued by the municipal authorities under Shop and Establishment Act.
(c) Sales and income tax returns.
(d) CST/V AT/CST certificate (provisional/ final).
(e) Certificate/registration document issued by Sales Tax/Service Tax/ Professional Tax authorities.
(f) IEC (Importer Exporter Code) issued to the proprietary concern by the office of DCFT/Licence/ certificate of practice issued in the name of the proprietary concern by any professional body incorporated under a statute.
(g) Complete Income Tax Return (not just the acknowledgment) in the name of the sole proprietor where the firm’s income is reflected, duly authenticated/ acknowledged by the Income Tax authorities.
(h) Utility bills such as electricity, water, and landline telephone bills.
In cases where the ACHFPL are satisfied that it is not possible to furnish two such documents, ACHFPL may, at their discretion, accept only one of those documents as proof of business/activity.
Provided Altum Credo to undertake contact point verification and collect such other information and clarification as would be required to establish the existence of such firm, and shall confirm and satisfy itself that the business activity has been verified from the address of the proprietary concern.

3. CDD measures for legal entities

For opening an account of a company, one certified copy of each of the following documents shall be obtained:

(a) Certificate of incorporation;
(b) Memorandum and Articles of Association;
(c) Permanent Account Number of the company;
(d) A resolution from the Board of Directors and power of attorney granted to its managers, officers or employees to transact on its behalf;
(e) one copy of an OVD containing details of identity and address, one recent photograph, and Permanent Account Numbers of Form 60 of the managers, officers, or employees, as the case may be, holding an attorney to transact on its behalf.

1. For opening an account of a partnership firm, one certified copy of each of the following documents shall be obtained:
(a) Registration certificate;
(b) Partnership deed;
(c) Permanent Account Number of the partnership firm;
(d) one copy of an OVD containing details of identity and address, one recent photograph, and Permanent Account Numbers of Form 60 of the managers, officers, or employees, as the case may be, holding an attorney to transact on its behalf.

2. For opening an account of a trust, one certified copy of each of the following documents shall be obtained:
(a) Registration certificate;
(b) Trust deed;
(c) Permanent Account Number or Form No.60 of the trust;
(d) one copy of an OVD containing details of identity and address, one recent photograph, and Permanent Account Numbers of Form 60 of the managers, officers, or employees, as the case may be, holding an attorney to transact on its behalf.

3. For opening an account of an unincorporated association or a body of individuals, one certified copy of each of the following documents shall be obtained:
(a) resolution of the managing body of such association or body of individuals;
(b) Permanent Account Number or Form No.60 of the unincorporated association or a body of individuals;
(c) power of attorney granted to transact on its behalf;
(d) one copy of an OVD containing details of identity and address, one recent photograph, and Permanent Account Numbers of Form 60 of the managers, officers, or employees, as the case may be, holding an attorney to transact on its behalf identification information as mentioned under
(e) Such information may be required by the company to collectively establish the legal existence of such an association or body of individuals. Explanation – Unregistered trusts/partnership firms shall be included under the term ‘unincorporated association’ and the term ‘body of individuals, including societies.

4. For opening accounts of juridical persons not specifically covered in the earlier part, such as the Government or its Departments, societies, universities, and local bodies like village panchayats, one certified copy of the following documents shall be obtained:
(a) Document showing the name of the person authorized to act on behalf of the entity;
(b) Aadhaar/PAN/ OVD for proof of identity and address in respect of the person holding an attorney to transact on its behalf and
(c) Such documents may be required by the ACHFPL to establish the legal existence of such an entity/juridical person.

4. CDD measures for identification of beneficial owner

For opening an account of a Legal Person who is not a natural person, the beneficial owner(s) shall be identified and all reasonable steps in terms of Rule 9(3) of the Rules to verify his/her identity shall be undertaken keeping in view the following:

(a) Where the customer or the owner of the controlling interest is a company listed on a stock exchange or is a subsidiary of such a company, it is not necessary to identify and verify the identity of any shareholder or beneficial owner of such companies.
(b) In cases of trust/nominee or fiduciary accounts whether the customer is acting on behalf of another person as trustee/nominee or any other intermediary is determined. In such cases, satisfactory evidence of the identity of the intermediaries and of the persons on whose behalf they are acting, as also details of the nature of the trust or other arrangements in place shall be obtained.

5. Enhanced due diligence measures

Accounts of Non-face-to-face customers: ACHFPL shall ensure that the first payment is to be effected through the customer’s KYC-complied account, for enhanced due diligence of non-face to face customers
Accounts of Politically Exposed Persons (PEPs): i) ACHFPL shall have the option of establishing a relationship with PEPs provided that:
(a) sufficient information including information about the sources of funds and accounts of family members and close relatives is gathered on the PEP;

(b) the identity of the person shall have been verified before accepting the PEP
(c)the decision to open an account for a PEP is taken at a senior level in accordance with the ACHFPL customer acceptance policy
(d) all such accounts are subjected to enhanced monitoring on an ongoing basis
(e )in the event of an existing customer or the beneficial owner of an existing account subsequently becoming a PEP, senior management’s approval is obtained to continue the
business relationship;
(f) The CDD measures as applicable to PEPs including enhanced monitoring on an ongoing basis are applicable.

6. Customer’s accounts opened by professional intermediaries:

ACHFPL shall ensure while opening customer’s accounts through professional intermediaries, that:
(a) Customer shall be identified when a client account is opened by a professional intermediary on behalf of a single client.
(b ACHFPL shall have the option to hold ‘pooled’ accounts managed by professional intermediaries on behalf of entities like mutual funds, pension funds, or other types of funds.
(c) ACHFPL shall not open accounts of such professional intermediaries who are bound by any client confidentiality that prohibits disclosure of the client details to the company.
(d) All the owners shall be identified where funds held by the intermediaries are not comingled at the level of the company, and there are ‘subaccounts’, each of them attributable to a beneficial owner, or where such funds are co-mingled at the level of ACHFPL, the ACHFPL shall look for the beneficial owners.
(e) ACHFPL shall, at their discretion, rely on the CDD done by an intermediary, provided that the intermediary is a regulated and supervised entity and has adequate systems in place to comply with the KYC requirements of the customers.
(f) The ultimate responsibility for knowing the customer lies with ACHFPL